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Should I create LLC for real estate

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  • #16

    I would explore an LLC as the legal entity for the investment group.  Rather than the original poster him/herself as the member of that LLC, he/she might form a family limited partnership (FLP) to be the member of the LLC, with he/she as a partner in the FLP.  From a tax perspective, the LLC would issue a K-1 to the FLP as member, and the FLP would issue a K-1 to the individual partners in the FLP.  Asset protection would occur at the LLC and the FLP level.


    • #17

      Myself and a couple partners are forming a small investment group which will distribute a K1 for profit sharing.  Should I form a personal LLC for which distributions to flow into, mostly for taxes and and asset protection?  I’m new to all of this.

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      Yes, an LLC should always be formed to own real estate. If your state allows “series LLCs” and you will own multiple parcels, that is what you need. I see no reason for each investor to be inside an LLC, but there are many facts I am not privy to at this point. You definitely want a good attorney and a good CPA and an air-tight operating agreement. The OA will determine dissolution, what happens if a partner dies or divorces or wants out (can s/he give her share to someone else or do the remaining partners have first right of refusal?), who makes the decisions, what if there is a tie, how much insurance do you carry, who is responsible for making sure the bills are paid, how do you decide what and when to buy and sell, how much $$ is distributed to partners annually and how is that determined, how much $$ are partners responsible for putting in if there is a shortfall, how much time are you expected to spend in the venture, and so on and on and on.

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      Is this just for investment real estate or does it include residence as well?


      • #18

        If it's any substantial amount of money at all, you should be hiring your own local attorney to at least review the contract/operating agreement/articles/pship agreement.  Someone in the estate planing, contract, business arena.  Should just be a few hours of time, max.